Question

Jilk Inc.'s contribution margin ratio is 64% and its fixed monthly expenses are $44,500. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $131,000?
a. $83,570.
b. $5,930.
c. $36,070.
d. $89,500.

Answer 1

Answer:

c. $36,070

Explanation:

* The Data is Inconsistent with the options given.

Net operating Income is calculated by deducting all the variable and fixed expenses from the revenue for the period.

As per given data

Sales = $131,000

Contribution Margin Ratio = 64%

Contribution Margin = $131,000 x 64% = $83,840

As contribution margin is calculated after deducting the variable cost from the sales value, so up to contribution margin the variable cost is settled and now we have to deduct fixed expense from contribution margin to arrive at net income for the period.

Net Income = $83,840 - $44,500 = $39,340

A similar and correct question is given below, and answer is also made according to this question.

Bolding Inc.'s contribution margin ratio is 61% and its fixed monthly expenses are $47,500. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $137,000?

$83,570

$5,930

$36,070

$89,500

Net operating Income is calculated by deducting all the variable and fixed expenses from the revenue for the period.

As per given data

Sales = $137,000

Contribution Margin Ratio = 61%

Contribution Margin = $137,000 x 61% = $83,570

As contribution margin is calculated after deducting the variable cost from the sales value, so up to contribution margin the variable cost is settled and now we have to deduct fixed expense from contribution margin to arrive at net income for the period.

Net Income = $83,570 - $47,500 = $36,070